FEDERAL COURT OF AUSTRALIA D'Arrigo v Carter, in the matter of Gartner Wines Pty Ltd and the Corporations Act 2001 [2003] FCA 5 CORPORATIONS LAW – Examinations under ss 596 and 597 of the Corporations Act 2001 – Improper Purpose – information which may be obtained in examination – whether information can be used in third party litigation – whether possibility of such use sufficient to establish an improper purpose – same solicitor acting both for Receiver and for party in third party litigation – whether conflicting duties of solicitor sufficient to establish improper purpose AFFIDAVITS – Whether affidavit must be sworn before someone who is independent of deponent. Corporations Act 2001 (Cth) Pt 5.9 Div 1 Federal Court Act 1976 (Cth) s 45 Evidence Act 1995 (Cth) s 186 Federal Court (Corporations) Rules 2000 Ainsworth v Hanrahan (1991) 25 NSWLR 155 cited Bienke v Minister for Primary Industry (1996) 135 ALR 128 cited Bourke v Davis (1889) 44 Ch D 110 cited El-Kalza v Thompson (1991) ANZ Conv R 11 cited In re Gregg; In re Prance (1869) LR 9 Eq 137 cited Re Cirillo; Ex parte Commissioner of Taxation (1992) 36 FCR 279cited Re Southern Equities Corporation Ltd (in liq); Bond & Anor v England (1997) 25 ACSR 394 Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 cited Johns v Australian Securities Commission (1993) 178 CLR 408 cited Harman v Secretary of State for Home Department [1983] 1 AC 280 cited Ainsworth v Hanrahan (1991) 25 NSWLR 155 at 168 cited Chapmans Ltd v Australian Stock Exchange [2002] FCA 666(unreported decision of Tamberlin J delivered 25 August, 1995) cited Moage Ltd (in liq) v Jagelman (2002) 43 ACSR 173 cited Sentry Corp v Peat Marwick Mitchell & Co (1990) 95 ALR 11 cited Re Addstone Pty Ltd (in liq); Ex p Macks (1998) 30 ASCR 162 cited Walton v Gardner (1993) 177 CLR 378 cited Carindale Country Club Estate Pty Ltd v Astill (1993) 115 ALR 112 cited Re Excel ;Worthley v England (1994) 52 FCR 69 cited New Zealand Steel (Australia) Ltd v Burton (1994) 13 ACSR 610 cited Bienke v Minister for Primary Industry (1996) 135 ALR 128 cited Gerah Imports Pty Ltd v The Duke Group (1993) 61 SASR 557 cited A Apps, "Rules on Affidavits" (1992) 66 ALJ 163 IN THE MATTER OF GARTNER WINES PTY LIMITED (Receivers & Managers App) (Administrators App) ACN 086 333 388 and OTHERS AND THE CORPORATIONS ACT 2001 GUY PETER D'ARRIGO v BRUCE JAMES CARTER and JOHN RONALD HART NO s 3015 OF 2002 SELWAY J 10 JANUARY 2003 ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY S 3015 OF 2002 IN THE MATTER OF GARTNER WINES PTY LIMITED (Receivers & Managers App) (Administrators App) ACN 086 333 388 TYNSKI PTY LTD (Receivers and Managers App) ACN 008 162 123 SKYBAY PTY LTD ( Receivers and Managers App) (ACN 008 163 782 NORSBAY PTY LTD (Receivers and Managers App) (ACN 008 205 687 AUSVINE VITICULTURAL MANAGEMENT PTY LTD (Receivers and Managers App) ACN 007 184 901 FRESREND PTY LTD (Receivers and Managers App) ACN 008 061 407 VAMTOWN PTY LTD (Receivers and Managers App) ACN 008 061 407 GARTNERS' VINICULTURE MANAGEMENT PTY LTD (Receivers and Managers App) (Administrators App) ACN 080 534 989 MJ GARTNER PTY LTD (Receivers and Managers App) ACN 077 644 181 GARTNER FARMS PTY LTD (Receivers and Managers App) (Administrators App) ACN 086 128 850 AND THE CORPORATIONS ACT 2001 BETWEEN GUY PETER D'ARRIGO AND APPLICANT BRUCE JAMES CARTER and JOHN RONALD HART RESPONDENTS JUDGE: SELWAY J DATE OF ORDER: 10 JANUARY 2003 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: (1) The application by Guy Peter D'Arrigio pursuant to rule 11.5 of The Federal Court (Corporations) Rules be dismissed. (2) The applicant Guy Peter D'Arrigio pay to the respondents Bruce James Carter and John Ronald Hart their costs of and incidental to this application, such costs to be taxed if not agreed. (3) Bruce James Carter have liberty within 7 days of the date of this order to remove from the Court file the affidavit sworn by him on 20 November, 2002 in relation to this application by the applicant for the purpose of replacing that affidavit with a re-sworn affidavit. (4) The matter be returned to the Registry for relisting of the summons for examination at such time and place being at least 7 days after the date of this order as is convenient to the Registrar. Note: Settlement and entry of orders is dealt with Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY S3015 OF 2002 IN THE MATTER OF GARTNER WINES PTY LIMITED (Receivers & Managers App) (Administrators App) ACN 086 333 388 TYNSKI PTY LTD (Receivers and Managers App) ACN 008 162 123 SKYBAY PTY LTD ( Receivers and Managers App) ACN 008 163 782 NORSBAY PTY LTD (Receivers and Managers App) ACN 008 205 687 AUSVINE VITICULTURAL MANAGEMENT PTY LTD (Receivers and Managers App) ACN 007 184 901 FRESREND PTY LTD (Receivers and Managers App) ACN 008 061 407 VAMTOWN PTY LTD (Receivers and Managers App) ACN 008 061 407 GARTNERS' VINICULTURE MANAGEMENT PTY LTD (Receivers and Managers App) (Administrators App) ACN 080 534 989 MJ GARTNER PTY LTD (Receivers and Managers App) ACN 077 644 181 GARTNER FARMS PTY LTD (Receivers and Managers App) (Administrators App) ACN 086 128 850 AND THE CORPORATIONS ACT 2001 BETWEEN GUY PETER D'ARRIGO AND APPLICANT BRUCE JAMES CARTER and JOHN RONALD HART RESPONDENTS JUDGE: SELWAY J DATE: 10 JANUARY 2003 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 The respondents, Bruce James Carter and John Ronald Hart, both chartered accountants and both partners in the firm Ferrier Hodgson, were appointed as receivers and managers of Gartner Wines Pty Ltd and various associated companies on 9 August, 2002 pursuant to a Deed of Charge created in favour of National Australia Bank Ltd. ("the NBA") 2 On 25 September, 2002 the respondents were authorised by ASIC to make applications under sections 596A and 596B of the Corporations Act 2001 (Cth) ("the Act"). By definition they are each "eligible respondents" for the purposes of those sections. 3 On 21 November, 2002 the respondents filed in this Court an application to summons Guy Peter D'Arrigo for examination and to produce documents about the corporations' examinable affairs. Guy Peter D'Arrigio is an "examinable officer" of some of the Corporations; in respect of others it would seem clear that he can give "information about examinable affairs of" those Corporations. Pursuant to sections 596A and 596B of the Act, the Registrar issued a summons addressed to Mr D'Arrigo for him to be examined about the corporation's examinable affairs and to produce documents in his possession in respect thereto. 4 The applicant, Mr D'Arrigo has issued interlocutory proceedings under rule 11.5 of the Federal Court (Corporations) Rules seeking to have the summons set aside. It is with these proceedings that this judgment is concerned. BASIS FOR CHALLENGING SUMMONS 5 Although not altogether clear from the affidavit material there are three separate grounds for challenge: (1) The affidavit of Bruce James Carter sworn on 20 November, 2002 and filed herein on 21 November, 2002 in support of the application to summons Guy Peter D'Arrigio is invalid in that it was sworn before a partner in the accountancy firm Ferrier Hodgson. (2) The proceedings seeking the examination of Guy Peter D'Arrigio are an abuse of process in that Messrs Finlaysons (solicitors) act both for the receivers and for the National Australia Bank and consequently they have a conflict of duty which they cannot resolve. (3) The proceedings seeking the examination of Guy Peter D'Arrrigio are an abuse process in that the receivers are actuated by an improper purpose. I consider each of these grounds in turn. INVALIDITY OF THE SUPPORTING AFFIDAVIT 6 As noted above, Guy Peter D'Arrigio is an "examinable officer" in respect of some of the companies, but not all of them. In relation to those in respect of which he was not an "eligible applicant" the application for a summons for his examination was required to be supported by an affidavit under section 596C of the Act. An affidavit in support was filed. That affidavit was sworn on 20 November, 2002 by the respondent (in these proceedings) Carter before Mr Peter Holmes, a Justice of the Peace. Mr Holmes is a partner in Ferrier Hodgson. It would appear that Mr Holmes has been involved in the work at Ferrier Hodgson relating to the receivership. 7 Mr Wells QC, who appeared for the applicant, argued that the affidavit was invalid. He relied upon a number of cases. However, the principle, and the reasons for it, are sufficiently stated in the reasons of Kay J in Bourke v Davis (1889) 44 Ch D 110 at 126. In referring to the duties of a commissioner where a witness was swearing an affidavit Kay J remarked: "The commissioner's duty before he administers the oath is to satisfy himself that the witness does thoroughly understand what he is going to swear to; and he should not be satisfied on this point by any one but the witness himself. For this reason it has been the rule since the time of Lord Hardwicke that the Court does not accept an affidavit sworn before the solicitor in the cause, nor his clerk, although he may be a commissioner... The Court requires the security of an independent commissioner, and it is obvious that he ought not to take only the statement of a solicitor in the cause that the witness knows what is in this affidavit." (references omitted) 8 It may be doubted whether the commissioner's duty is now as rigorous as Kay J thought it to be (See A Apps, "Rules on Affidavits" (1992) 66 ALJ 163 at 165 referring to the case of El-Kalza v Thompson (1991) ANZ Conv R 11). In any event, it would appear that the principle was always restricted to solicitors: see In re Gregg; In re Prance (1869) LR 9 Eq 137 at 144-145. It may be that the rule is now otiose, even in that context. It has been set aside by rule or legislation in most jurisdictions. It seems clear that the rule has not been extended in other contexts, including where the affidavit was sworn before the servant of the deponent or before a co-employee: see Re Cirillo; Ex parte Commissioner of Taxation (1992)36 FCR 279 at 287-288 (albeit that in that case, unlike this, the person before whom the affidavit was sworn had no personal involvement in the matter). 9 I note that there is nothing in the Act or in s 45 of the Federal Court Act 1976 (Cth) or in s 186 of the Evidence Act 1995 (Cth) or otherwise which would require the person before whom an affidavit is sworn to be impartial and independent of the deponent. Nor is there anything in those provisions which would impose a duty upon a person taking an oath independently to verify the truth or otherwise of that which is deposed to. Nor, in my view, is there any obvious reason why such requirements would be implied. 10 I also note that a failure to file a valid affidavit would not appear to be a precondition to the making of an order under ss 596A or 596B of the Act: Re Southern Equities Corporation Ltd (in liq); Bond & Anor v England (1997) 25 ACSR 394 ("Re Southern Equities") at 429. 11 Finally, the respondents may wish to take a conservative view of the matter. If so, then I grant Carter leave to re-swear his affidavit of 20 November, 2002. ABUSE OF PROCESS – SOLICITORS 12 In order to understand the next argument put by Mr Wells QC it is necessary to say something more of the background. It is apparent from the affidavit material before me that various persons and companies associated with the companies in receivership have issued proceedings against the creditor, the National Australia Bank and others. The respondents and the companies in receivership are not parties to those proceedings. 13 It is also apparent that Mr Barrett, a partner in the legal firm of Finlaysons, has had the carriage on behalf of National Australia Bank of the proceedings instituted against it. He has also had the carriage of the examination proceedings and has been the managing solicitor for the respondents in these proceedings before me. 14 Mr Wells QC argues that the examination of the applicant will reveal information which the respondents and their solicitors, including Mr Barrett, are obliged to keep confidential for the purpose for which it was obtained. However, he also argues that Mr Barrett owes a duty to his other client, the National Australia Bank to reveal all that he knows that may be relevant to its case. Mr Wells QC says that the two duties are inconsistent. 15 Later in these reasons it will be necessary for me to consider in more detail the purpose to which any information that is likely to be revealed by the examination of the applicant might be put. For the purposes of the current argument it is sufficient for me to assume that some of the questions that may be asked of the applicant and some of the information that might be obtained from him, could be relevant in the proceedings against the National Australia Bank. 16 The duty of confidentiality to which Mr Wells QC refers is one that is well known. It is not limited to obtaining information through judicial process. Where information is obtained by lawful compulsion that information is normally to be treated as subject to a duty of confidentiality. Subject to any overriding public interest (see Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 ("Esso") at 31-32, 48), the information can only be used for the purpose for which it was obtained: see Johns v Australian Securities Commission (1993) 178 CLR 408 at 424, 435-436, 452-453, 458, 468-469. 17 The same duty applies where information is compulsorily obtained by court process, such as discovery. 18 Were the issue free from authority then there may be some reason to doubt whether there is any duty of confidentiality in this instance. Notwithstanding some of the reasoning in Harman v Secretary of State for Home Department [1983] 1 AC 280 ("Harman"), I am unable to see how a duty of confidentiality can attach, or continue to attach, unless there is something relating to the information itself or the manner in which it is transferred to another that justifies treating it as confidential. Evidence given in open court is not confidential and no duty of confidentiality attaches to it, at least in the absence of court orders restricting the use of it. I refer to Ainsworth v Hanrahan (1991) 25 NSWLR 155 at 168; Chapmans Ltd v Australian Stock Exchange [2002] FCA 666(unreported decision of Tamberlin J delivered 25 August, 1995); Esso at 32-22; Moage Ltd (in liq) v Jagelman (2002) 43 ACSR 173 at 176. Indeed, to impose an absolute duty of confidentiality on material that has been published in open court, and a federal court at that, may well raise constitutional issues. Consequently, the provisions of s 597(4) and 597(14A) of the Act that (subject to any court order under s 596F), the examination should be held in public and the transcript be publicly available at least upon payment of the fee, would strongly suggest to me that no duty of confidentiality attaches to information disclosed in or during the examination. 19 However, it would appear that there is authority is to the contrary. I refer toSentry Corp v Peat Marwick Mitchell & Co (1990) 95 ALR 11 at 38-39 and to Re Southern Equities. In the latter case it appears to have been argued that there was a duty of confidentiality and that this was evidence of improper purpose (see at 421). Although an order for the examination to take place in private had been made this does not seem to have been treated as critical in the reasoning. Lander J summarised the previous authority as follows (at 437): "First, that an undertaking is imposed upon a liquidator with respect to documents produced to the court in response to an examination summons. Second, the undertaking is not to use the documents for a collateral or ulterior purpose. Third, the use of documents in the liquidation is not a collateral or ulterior purpose." I note that Lander J referred only to "documents" rather than oral evidence. It may be that this is a distinction of some importance, given some of the reasoning of their Lordships in Harman. In this regard I also refer to the discussion by Mansfield J in Re Addstone Pty Ltd (in liq); Ex p Macks (1998) 30 ASCR 162. 20 In any event, bound as I am by this authority it seems to me that the effect of subs 597(4) and (14A) of the Corporations Act, 2001 is not to limit the confidentiality attaching at least to the documents produced in answer to the summons, but rather to identify at least one "use" that may be made of the documents in the liquidation. In particular, in the absence of any court order to the contrary, the disclosure by the receiver to the creditor of the information or documents obtained in an examination is not a breach of any duty of confidentiality. Such disclosure is clearly envisaged by subs 597(4) and (14A) of the Act. Such disclosure involves the "use of the documents in the liquidation" as envisaged by the statutory scheme. 21 If there had been any conflict of duty or potential conflict of duty by the solicitors for the respondents, the question would then have arisen whether the appropriate orders would have been orders against the receivers (based, perhaps, upon an abuse of process), or orders against the solicitors: contrast Walton v Gardner (1993) 177 CLR 378 and Carindale Country Club Estate Pty Ltd v Astill (1993) 115 ALR. 112. However, in the circumstances it is unnecessary for me to consider that question. 22 There being no breach of duty by the liquidator in disclosing to the creditor information obtained in the examination, then the issue of Mr Barrett's position does not raise any question that need concern me. IMPROPER PURPOSE 23 This was the primary argument relied upon by Mr Wells QC. The evidence he relied upon was wholly insufficient for the purpose. The applicant did not know why the respondents had sought to examine him. The evidence upon which the applicant principally relied was the affidavit evidence of Michael Gartner. In his affidavit filed herein on 6 December, 2002 Mr Gartner referred to other witnesses who are also sought to be examined by the respondents. From this Mr Gartner appears to have concluded that all of the witnesses, including the applicant, can give evidence relating to "critical issues raised in the cross claim of NAB". 24 This is a great deal short of establishing improper purpose. Even if Mr Gartner's suspicions were true, this would not necessarily be evidence of an improper purpose. The question would still remain whether the companies in receivership could have any proper interest in the relevant litigation involving the National Australia Bank. Obviously they could, even if they or the companies in liquidation are not parties to that litigation. So far as is revealed by the affidavits, the litigation concerns who owns or is entitled to possession of particular assets. Given the nature of the commercial arrangements between some of the parties, the potential interest of the receivers (and the companies which they represent) in these issues is obvious. The relevant assets would appear to be assets which might be available in the liquidation. It is also obvious that the receivers' (and the companies which they represent) interest in these issues may be the same as the interest of the creditor. Consequently, even if the evidence established that the examination was to be used solely for the purpose of assisting the creditor in the third party litigation, this still would not be would not be sufficient to prove improper purpose. In order to do that, the evidence would need to establish that the particular result in the third party litigation could not benefit the corporations, their contributories or their creditors. See Re Excel ;Worthley v England (1994) 52 FCR 69 at 93; New Zealand Steel (Australia) Ltd v Burton (1994) 13 ACSR 610 at 614-615; Re Southern Equities at 431-433. Only then could any implication be drawn that the purpose of the liquidators was an improper purpose. But there is simply no evidence for the applicant dealing with the issue of benefit in relation to the liquidation. 25 But in this case the most that is established by the applicant is that Michael John Gartner has particular suspicions – not even that those suspicions are true. This is simply inadequate to establish improper purpose. It does not discharge the onus resting on those alleging improper purpose: see Bienke v Minister for Primary Industry (1996) 135 ALR 128 at 136; Gerah Imports Pty Ltd v The Duke Group (1993) 61 SASR 557 at 565-566. 26 But the respondents have not been content to rely upon the onus resting on the applicant. Bruce James Carter has relied upon his own affidavit in support of the examination summons and has filed a further affidavit. In those affidavits Mr Carter disavows any purpose of assisting in the litigation involving the National Australia Bank. He says that the purposes in seeking to examine Mr D'Arrigo are "to obtain information as to the examinable affairs of each of the companies in the Gartner Group so as to properly discharge our duties as receivers and managers thereof". In particular, he seeks to investigate "various transactions that appear to have been entered into other than at arms length.". Mr Carter denies that he seeks "to examine Mr D'Arrrigo for the alleged improper purpose of seeking to advance the position of the National in the Federal Court proceedings." 27 Finally, reference can be made to a letter dated 9 December, 2002 from Messrs Finlaysons to Messrs Cosoff Cudmore Knox, where Messrs Finlaysons advise: "We are writing to advise that Mr Carter does not intend to ask Mr D'Arrigo or seek the provision of any information from D'Arrigo Associates Pty Ltd of any information or issue relating to the matters the subject of the Federal Court proceedings action number S189 of 2002. That has always been his intention." I am unaware of why the applicant did not simply rely upon that undertaking. 28 In any event the Registrar has the power under ss 596F and 597 of the Act and the undoubted ability to ensure that the examination is properly conducted. 29 Looked at in its entirety the evidentiary material before me does not satisfy me that the respondents are actuated by any improper purpose in seeking to examine the applicant. 30 For these reasons, the application is dismissed with costs. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Selway. Associate: Dated: 10 January, 2003 Counsel for the Applicant: Mr WJN Wells QC with Mr JM Cudmore Solicitor for the Applicant: Cosoff Cudmore Knox Counsel for the Respondent: Mr MCJ Hoffman with Mr SA Evans Solicitor for the Respondent: Finlaysons Date of Hearing: 4, 11, 12, 13 and 18 December, 2002 Date of Judgment: 10 January, 2003